Extra costs placed on business by the UK government policies ”have resulted in a deterioration in the viability of rural community-owned businesses and risks of associated job losses”, warns Plunkett UK.
The charity, which represents rural community business, made the remarks in its response to a call for evidence by the Labour Rural Research Group (LRRG), which is compiling a report on rural poverty.
Plunkett warns the difficult business environment could harm “the quality of life in general in rural area” and urges ministers to support community ownership as a solution.
The LRRG is a group of over 35 rural and semi-rural Labour MPs, which says it was ”set up to support the government’s mission to deliver for the UK”.
With the party languishing in the polls and already facing a potential rural backlash over its reforms to inheritance tax, the issue is a crucial one for Labour.
Announcing the study, the LRRG said: “The government was elected on the promise of change and rural areas should be at the heart of our national ambitions. But the distinct challenges facing rural Britain require deep and careful consideration.
“The LRRG is focused on bringing forward research, evidence and policy ideas that will help unlock the potential of our rural communities while highlighting the challenges our rural communities face.”
In his response to the consultation, Plunkett CEO James Alcock said: “For too long, successive governments have failed to recognise the unique challenges facing rural areas – where people live without access to basic services, affordable transport, or even a place to gather and socialise.”
And although Plunkett welcomed the government’s commitment to doubling the size of the co-operative sector, Alcock said the charity is “disappointed” by Labour’s policies.
Although the organisation supports the £5bn Pride in Place programme, Alcock warns this “risks bypassing rural communities altogether due to the funding formulas being applied”.
Meanwhile, “reforms to business rates, national insurance and minimum wage thresholds are placing existing community-owned businesses under increased pressure and significant risk of closure.”
In a stark message two ministers, he added: “Together, these measures risk being counterproductive to the stated policy objectives: if the operating environment is made more challenging, it raises the question of why communities would be encouraged to establish new co-operatives in the first place.”
But Alcock welcomed the consultation, thanking rural Labour MPs, for recognising the lack of effective rural proofing in government policy”.
He said Plunkett and its “growing network of rural community-owned businesses can contribute to key government priorities”.
Related: Plunkett says community business delivers despite lack of government help
These priorities include doubling the co-op sector, building stronger communities, granting community groups enhanced right-to-buy powers, providing a sustainable solution for the future of the rural Post Office services, and overcoming local opposition to the delivery of 1.5 million new homes.
The community-owned sector can also help with ”persistent and interconnected challenges” facing rural areas, “across income, employment, access to services, housing, health, and skills”.
Community-owned businesses, said Plunkett in its recommendations, “sustain essential services, create local employment, reduce isolation, and retain wealth locally.
“With targeted government support and rural-sensitive policy design, they can play a central role in tackling deprivation and supporting inclusive rural growth.”
The charity said that with the right policies in place, the opening rate of rural community businesses could increase from 30 to 60 a year over a period of 10 years. This would represent a total growth equivalent to 1,075 rural community businesses trading in 2029 with a GVA equivalent of £567m; or 1,350 rural community businesses trading in 2034 with a GVA equivalent of £713m.
To support this, growth, Plunkett is calling on the government to back its free core advice and support services to the sector with an annual grant of £250,000 – which, it argued, “would generate an estimated £15.8m in gross value added (GVA)”.
The organisation also wants a rural community ownership Fund (COF) to “raise awareness of the community ownership model, develop a larger pipeline of start-up groups, build the capacity and confidence of pipeline groups to progress to trading stage and provide blended finance with significant levels of community match-funding.”
A £10m investment over 10 years would establish 500 rural community-owned businesses with a total estimated GVA of £264m, it said.
Ministers could also “power up existing community businesses” with a £1.5m revenue fund to support over 50 ‘at risk’ rural community businesses each year.
“Revenue funding would enable community businesses to invest in temporary staffing to maintain operations,” said Plunkett, “providing breathing space and avoiding reduced opening hours or scaled-back services – while allowing time to engage more widely with the community, to identify new opportunities to evolve services, broaden impact, and ultimately grow sales and profitability.
A further 10-year fund worth £5m could support over 250 rural community businesses through expansions and upgrades, it added.
Plunkett’s submission also recommends a strengthened Community Right to Buy, giving community groups the first right of refusal on Assets of Community Value.
And on tax and business rates, it said: “Plunkett members sometimes qualify for business rate relief due to their rural location, small business status, or operation within retail, hospitality or leisure.
“While welcome, this support is applied inconsistently and is under constant threat of withdrawal. We advocate for all businesses trading primarily for community or social benefit to receive consistent rate relief, assessed through their legal structure or governance.
“The resulting savings would allow these enterprises to reinvest in improving services for disadvantaged groups, or in green energy generation and energy efficiency measures, amplifying their positive impact on communities.”
In terms of contentious plans for new housing, Plunkett recommends “legislative reform to embed placemaking within new developments”.
This would see measures to “embed” community businesses like shops or cafés into new developments.
“We advocate for mandatory consultation for community-owned infrastructure in new developments,” it said. “Where this is not viable, Section 106 contributions should ensure funds are pooled for community infrastructure elsewhere in the local area.
“This approach ensures new developments become thriving places to live and work, with inclusive local economies and strong social connections.”
Related: Plunkett to work with Barratt Redrow on community business planning
Another measure to maintain rural services would tailor Post Office contracts to partner with community businesses, the charity said.
“One in five of our members host Post Office services, in order to safeguard the essential services they offer including access to cash in the countryside,” it added. “However, the overwhelming feedback is the current contract types are unworkable for volunteer led enterprises – often requiring one individual to be legally and financially liable for losses, requiring Post Offices to be services for long opening hours, and requiring volunteers to operate a wide range of complicated services.
“Plunkett has made recommendations to redesign contracts for community businesses on the basis they are likely to be the main host organisation in the future.”
Plunkett added: “Rural deprivation cannot be addressed through urban policy models alone. Community ownership provides a place-based, inclusive, and resilient response that tackles multiple deprivation domains simultaneously.
“By embedding community-owned businesses within rural economic, social, and service strategies, government can deliver meaningful progress against the 2025 indices of deprivation and ensure rural communities are no longer left behind.”
